GBP/USD: Sterling eases after BoE decision
|The pound slipped after the Bank of England monetary policy decision on Thursday, with the GBPUSD pair falling circa 30 pips in the initial reaction, bringing the cable back below the 1.27 level. Nevertheless, the pair was still up 0.5% on the day, boosted by the weakening dollar.
As widely expected, the BoE left monetary policy unchanged, with all nine MPC members voting unanimously to keep the rate at 0.75%.
The following statement did not bring anything surprising as the central bank acknowledged that rates have fallen materially further, while inflation is likely to fall below the 2% target this year. This might be interpreted that the BoE will join the other central banks in easing monetary policy, despite promising to tighten it.
On Wednesday, the Fed confirmed it is ready to cut rates as soon as in July, with markets now pricing in a 100% probability of this to happen. Additionally, two other rate cuts are expected by market participants till the end of the year.
Moreover, the US central bank removed reference to being "patient" on rates while adding that "uncertainties" around its outlook have increased, even if did not warn of "material downside risks" to outlook.
Finally, for 2019, eight Fed officials see lower rates with seven of them seeing two cuts this year (and one seeing one cut). At the same time eight see unchanged rates and one sees a rate hike.
The greenback dropped sharply after the dovish FOMC decision, while stocks and bonds rose.
From the technical point of view, it looks like the bearish trend could be over for now (mainly due to the US dollar weakness). As long as sterling trades above 1.2670, the short-term outlook could be bullish.
Another stronger support seems to be in the 1.2640 - 1.2610 region.
On the upside, the selling offers will most likely be located at 1.2740 and 1.2760 and if the pound jumps above these levels, stop losses could be hit, which might push the currency further higher.
More importantly, the medium-term trend could switch back to bullish if the GBPUSD pair closes above 1.2760 on a daily basis.
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